Civil Penalty Fund

Congress established the Civil Penalty Fund through the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to provide compensation to consumers who have been harmed by violations of federal consumer financial protection law.

When the Bureau collects a civil penalty through an enforcement action, that penalty is deposited into the Civil Penalty Fund. The money in the Fund is pooled and can be used to compensate victims who haven’t received full compensation for their harm through redress paid by the defendant in their case.

In accordance with the Dodd-Frank Act and the Bureau's Civil Penalty Fund rule, the Fund can only be used for two purposes: to compensate eligible harmed consumers and, to the extent that victim payments are not practicable, to provide funding for consumer education and financial literacy programs. If victims cannot be located or it is otherwise not practicable to pay victims, the Bureau may keep the money in the Fund for victims in future cases, or the Bureau may use money in the Fund for consumer education and financial literacy programs.

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Victim payments

The Bureau may make Civil Penalty Fund payments to consumers who were harmed by a violation for which civil penalties were imposed, and who aren’t otherwise expected to get full compensation for their compensable harm, as described by the rule. The Bureau hopes to make payments to all such victims, but whether it will be able to will depend on the amount of money in the Fund and other factors.

Consumer education & financial literacy

When all eligible victims have already gotten full compensation (or when payments to victims otherwise aren’t feasible), the Bureau may use Civil Penalty Fund money for consumer education and financial literacy programs.

Governance

The rule that governs the Civil Penalty Fund explains which victims may receive payments and how much they may receive, outlines the process for allocating funds, and establishes requirements for public reporting. The Fund is managed by the Fund Administrator, who reports to the CFPB’s Chief Financial Officer and is advised by a Governance Board.

Allocation schedule

Frequently asked questions about Civil Penalty Fund

When a person or company violates a federal consumer financial protection law, the Bureau
can bring an enforcement proceeding against them. If that person or company is found to
have violated the law, it may have to pay a civil penalty, also known as a civil money
penalty. When the Bureau collects civil penalties, it deposits them in the Civil Penalty Fund.
The Fund was established by the Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010.

The Bureau will use the money in the Civil Penalty Fund to provide some compensation to consumers who were harmed by violations of federal consumer financial law for which civil penalties were imposed. To the extent that victims cannot be located or it is otherwise not practicable to pay victims, the Bureau may use money in the Fund for consumer education and financial literacy programs. The Bureau has issued a Civil Penalty Fund rule that specifically governs how the Bureau uses the money in the Civil Penalty Fund.

The Bureau issued a rule to inform the public about how it will use the money in the Civil
Penalty Fund. The Bureau also published a notice of proposed rulemaking (NPRM) to seek
public input on the Civil Penalty Fund rule and ways that the Bureau could improve the rule
in the future.

The Civil Penalty Fund rule became effective on May 7, 2013.

The rule governs how the Bureau uses money in the Civil Penalty Fund. The rule:

Provides that the Bureau will designate a Fund Administrator who will manage the Civil Penalty Fund in accordance with the rule.

Explains the conditions under which victims may receive payments from the Fund and the amounts that those payments may be.

Establishes procedures that the Fund Administrator will follow to decide how money in the Fund will be allocated, both to classes of victims and for consumer education and financial literacy programs.

Explains how payments will be distributed to victims.

Requires the Fund Administrator to issue regular reports on how money in the Civil Penalty Fund has been used.

The Civil Penalty Fund Governance Board is chaired by the Bureau’s Chief of Staff and
includes the Associate Director for Supervision, Enforcement, Fair Lending & Equal
Opportunity; the Associate Director for Consumer Education & Engagement; the Chief
Operating Officer; and the General Counsel.

All civil penalties are deposited into the Civil Penalty Fund, where they are pooled and can
be used for payments to any eligible victim. Victims are not limited to receiving only what
the person or company that harmed them paid into the Fund.

The Bureau may make Civil Penalty Fund payments to consumers who were harmed by a
violation for which civil penalties were imposed and who aren’t otherwise expected to get full
compensation for their compensable harm, as described by the rule. The Bureau hopes to
make payments to all such victims, but whether it will be able to will depend on the amount
of money in the Fund and other factors.

Every six months, the Fund Administrator will determine which classes of victims will receive
payments from the Fund. To make that determination, the Fund Administrator will assess
how much money is available in the Fund and will review closed cases to determine which
victims are eligible to receive payments. The Fund Administrator will then follow the
procedures established in the rule to allocate funds to “classes” of victims—that is, to groups
of victims from a case that suffered from the same kind of violation. Once funds are
allocated to a class of victims, we will begin the process of distributing payments to victims
in that class.

In accordance with the Civil Penalty Fund rule, the Bureau
allocated the following amounts to the eligible classes of victims in the
following cases and to consumer education and financial literacy programs:

May 30, 2013

Payday Loan Debt Solution, Inc. $488,815

Gordon, et al. $10,000,000

Consumer Education and Financial Literacy Programs $13,380,000

November 29, 2013

American Debt Settlement Solutions, Inc. $499,248

National Legal Help Center, Inc. $2,057,983

May 30, 2014

Meracord LLC $11,542,229

3-D Resorts–Bluegrass, LLC. $6,704,100

November 29, 2014

Culver Capital, LLC $3,400,434

Amerisave Mortgage Corporation $1,380,470

Global Client Solutions, LLC $107,995,400

May 29, 2015

College Education Services LLC $3,459,336

Union Workers Credit Services, Inc. $18,908,744

National Corrective Group, Inc. $23,262,067

Culver Capital, LLC $421,481

November 27, 2015

Hoffman Law Group f/k/a Residential Litigation $11,074,842

Student Financial Aid Services, Inc. $9,300,000

Consumer Education and Financial Literacy Programs $15,432,809

May 27, 2016

Morgan Drexen, Inc. and
Walter Ledda $98,889,115

Irvine Web Works, Inc.
d/b/a Student Loan Processing $7,923,548

Student Aid Institute,
Steven Lamont $3,508,900

November 29, 2016

Morgan Drexen, Inc. and Walter Ledda $33,993,373

May 30, 2017

Orion Processing, LLC, d/b/a World Law Processing, et al. $98,408,416

Siringoringo et al. $20,825,000

Global Client Solutions $8,188,668

Please refer to our list of payments to harmed consumers by case to
find out which distributions are currently in process. Click on the case name for information on who
to contact about whether you’ll receive a payment. If the case that affected you is not listed
on that page, the distribution process for your case has not yet begun. Please check back for updates in the future.

The
total of all Civil Penalty Fund deposits through March 31, 2017, is $554 million.

Under the rule, victims may receive up to the amount of their uncompensated harm from the
Fund. The rule describes what will constitute victims’ “uncompensated harm” for purposes
of payment from the Civil Penalty Fund. The Civil Penalty Fund is not intended as a
complete replacement for other sources of compensation. Depending on the circumstances
of a case, the amount that the Bureau might pay from the Fund may provide only partial
compensation for the full scope of victims’ harm. The amount that victims will actually
receive will depend on how much money is in the Fund and other factors.

To determine the amount of a victim’s uncompensated harm, the Fund Administrator will
take the victim’s total compensable harm, and subtract out any compensation that the victim
has received—or is reasonably expected to receive—for that harm. The Fund Administrator
will determine the victim’s total compensable harm by looking to the terms of the relevant
court or administrative order. If the amount of a victim’s compensable harm cannot be
determined based on the terms of the relevant order, the victim’s compensable harm
generally will be his or her out-of-pocket losses that resulted from the violation.

The rule establishes procedures that the Fund Administrator will follow to decide how much
money victims will receive. If there is enough money available, the Fund Administrator
generally will allocate funds so as to give all eligible victims full compensation for their
uncompensated harm, as described in the rule. The rule also establishes procedures for the
Fund Administrator to follow if there isn’t enough money available in the Fund to
compensate everyone fully.

Allocating funds means setting aside money for a specific purpose. For purposes of the Civil
Penalty Fund, the Fund Administrator “allocates” funds when she sets aside money from the
Civil Penalty Fund for payments to particular classes of victims, or for use on consumer
education and financial literacy programs.

Under the rule, the Fund Administrator will decide how to use money in the Fund every six
months. In particular, every six months, the Fund Administrator will allocate funds to
particular classes of victims and, if appropriate, for consumer education and financial literacy
programs. The Fund Administrator has posted a schedule on consumerfinance.gov that
shows when these allocations will occur. Under the current schedule, allocations are made
between April 1 and May 30, and between October 1 and November 29 of each year.

Once the Fund Administrator allocates funds to a class of victims, the Bureau will begin the
process of distributing payments to the victims in that class. That process includes
identifying and locating the victims in the class. When the first payments will be distributed
to individual victims will depend on how long that process takes. The Bureau is working with
its third-party administrators to distribute payments to eligible victims in classes from cases
to which funds have been allocated. Please refer to the table at the bottom of this webpage, for a list of cases currently in
distribution.

If there is more than enough money in the Civil Penalty Fund to compensate fully all eligible
victims’ uncompensated harm, the Bureau generally will first provide full compensation to all
eligible victims to the extent practicable. Then, it may allocate remaining funds for consumer
education and financial literacy programs, and/or it may keep money in the Fund for future
victims.

If, at the time of a scheduled allocation, there is not enough money available in the Civil
Penalty Fund to provide full compensation for all eligible victims’ uncompensated harm, the
Fund Administrator will allocate funds equitably among the classes of victims from the most
recent six-month period, who have not yet had an opportunity to receive an allocation from
the Fund. The Fund Administrator will then allocate funds to classes of victims from
preceding six-month periods if funds remain. If there is not enough money to give full
compensation to all eligible victims who could practicably be paid, no money will be
allocated for consumer education and financial literacy programs.

Every six months, the Fund Administrator will decide how much money, if any, to allocate for
consumer education and financial literacy programs. The first priority will always be to
allocate funds for payments to victims. However, if funds remain after allocating enough
money to provide full compensation to all eligible victims who can practicably be paid, the
Fund Administrator may allocate some or all of those remaining funds for consumer
education and financial literacy programs.

The Bureau has adopted a set of criteria for selecting programs that will serve consumers
and improve consumer education and financial literacy. The criteria require, among other
things, that programs further the Bureau’s mission and strategic goals; promote or enhance
financial literacy and consumers’ economic security; and include specific outcome targets to
ensure the programs’ effectiveness.

The Bureau has selected the first consumer education and financial literacy program funded
with Civil Penalty Fund money. The Bureau has deployed a financial coaching program that
will serve two groups of Americans: (1) recent veterans who are transitioning from service
member to veteran life, as well as military widows and widowers, and (2) economically
vulnerable consumers who want to improve their approach to money management. The
Bureau has contracted with Armed Forces Services Corporation to run this program.

One-on-one financial coaching will help veterans transition from military to civilian financial
life, and help consumers who may be cash-strapped learn how to manage the money that
they have more effectively to achieve their financial goals. Working with a financial coach
can also help consumers identify and understand how to distinguish between useful
financial products and frauds and scams, thus safeguarding against them becoming victims
of frauds and scams in the future. The program for recent veterans and military spouse
survivors is planned to have a presence in all fifty states. The component for economically
vulnerable consumers, although smaller, will provide financial coaching services through
locations that are diverse in terms of geographic location, and include those from urban and
rural communities, and from different cultural, ethnic, racial, and other backgrounds.

The Bureau uses the federal procurement process for these programs and posts information
about the process and contract requirements as Civil Penalty Fund money becomes
available for consumer education and financial literacy programs.

The Civil Penalty Fund is maintained at the Federal Reserve Bank of New York in a noninterest-bearing
account.

The Fund Administrator, a position in the Office of the Chief Financial Officer, will maintain
responsibility for allocating and distributing funds from the Civil Penalty Fund. The Bureau
has contracted with two third-party administrators to assist the Fund Administrator with
administrative aspects of distributing payments to victims.

When the Bureau enforces the law, it or a court may order the person or company that
violated the law to take action to remedy the harm it caused consumers. This can include
requiring the person or company to compensate its victims for this harm. This compensation
is generally called “redress.” In some cases, the Bureau may require the person or
company that violated the law to pay the redress directly to consumers. And in other cases
the Bureau may require the person or company to pay the redress to the Bureau, and the
Bureau will then distribute the redress money to the victims of that person or company’s
violations.

Civil money penalties and payments to victims from the Civil Penalty Fund are different.
When a person or company that violated the law is ordered to pay a civil penalty, that
penalty does not go directly to that person’s or company’s victims, but rather is put in the
Civil Penalty Fund. All civil penalties that anyone pays to the Bureau are pooled in this
common Fund. Money in the Civil Penalty Fund then may be used to pay any eligible victim
in accordance with the Civil Penalty Fund rule.

The main difference between redress and Civil Penalty Fund payments is the link between
who pays the money and who receives the money. When a person or company pays
redress, that redress money can go only to victims of that person or company. When a
person or company pays a civil penalty, that money goes into the Civil Penalty Fund and
can be used to pay any eligible victim from any case.